Reduced rates

Tax Glossary Definition

Reduced rates

Many countries provide reduced tax rates under specific circumstances to encourage international investment and trade. This often occurs through tax treaties, which aim to avoid double taxation and promote cross-border economic activity. Under these agreements, lower withholding tax rates may apply to income types such as dividends, interest, and royalties.

Example: If a company in India pays dividends to a shareholder in the U.S., the India–U.S. tax treaty may allow for a reduced withholding tax rate of 15% instead of the standard domestic rate, benefiting the foreign investor.

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